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ARTICLE · 08 MAY 2023

Messaging Missteps: SEC's Increasing Focus On Off-Channel Communications

Proskauer Rose LLP
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The SEC's Enforcement Division is conducting a sweep investigation of large investment advisers regarding their employees' use of "off-channel" communications.

United StatesWealth Management
Margaret Dale
Margaret Dale
Michael Hackett
Michael Hackett
William C. Komaroff
William C. Komaroff
Timothy Mungovan
Timothy Mungovan
Dorothy Murray
Dorothy Murray
Joshua Newville
Joshua Newville
Todd J. Ohlms
Todd J. Ohlms
Robert Pommer
Robert Pommer
Seetha Ramachandran
Seetha Ramachandran
+12 more
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The SEC's Enforcement Division is conducting a sweep investigation of large investment advisers regarding their employees' use of "off-channel" communications. The sweep, which has been widely reported in the press, focuses on text messages from personal phones, personal email, WhatsApp and other platforms not typically captured or monitored by advisers. The sweep is causing considerable industry concern, following the SEC's announcement of settlements against a number of large broker-dealers for use of off-channel communications, that resulted in $1.235 billion of cumulative penalties.

Private fund advisers have become accustomed to the Exams Division's staff reviewing the use of off-channel communications in recent years. However, given how prevalent text messaging has become in modern business (and everyday life), the SEC is bound to find additional slip-ups as they investigate or conduct exams of private fund advisers. For example, internal text messages

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